China: a fascinating story of disruption

From Babylonians to Millennials and beyond… Alex Kimura Chief Strategy Officer, Aviva Asia shares his thoughts on why China is primed for digital disruption.

When the ancient Babylonians carved into stone the world’s first insurance policy in 1,755BC, they transformed civilisation with a concept. Fast forward to today, insurance is now undergoing one of its biggest transformations since its inception – digital disruption.

This is especially true in Asia, which has many high-potential markets driven by mega trends such as large and growing populations, an expanding middle class, and relatively low insurance penetration as well as ageing populations with multi-generational families.

China, in particular, tells a fascinating story of what can happen when a country quickly embraces the digital wave. China is home to Zhong An, the country’s first fully-digital insurer, which has since achieved a $8 billion valuation in just a few years.

This phenomenal growth was possible due to a number of factors. Digital penetration is high in China – as of end 2017, it boasted an Internet population of 772 million (out of which mobile Internet users made up 97.5 percent) and 455 million online payment users1. The country clocked a record 81 trillion yuan (USD 12.8 trillion) in mobile payments just within January to October last year, dwarfing the US49.3 billion spent in the U.S2.

The Chinese government allowed ample space for innovators to experiment prior to enacting official regulations for the digital sector, and later went on to actively support digitisation by building world-class infrastructure

Together, these factors created a favourable environment for digital insurers like Zhong An to take root and grow. China’s InsurTech market has continued to flourish since, with total InsurTech premiums predicted to reach over RMB 1.1 trillion (USD 174 billion) by 20203. Apart from Zhong An, traditional players such as Ping An Insurance and China Life are also investing aggressively on this front – both companies have announced USD 1 billion funds to accelerate InsurTech development.

Asia’s underinsured present ripe opportunities for disruption

China’s story points to a changing picture for insurance across Asia, and suggests a future with ample opportunities for innovation and disruption.

Driven by rising smartphone adoption in countries like India, Indonesia and Philippines, insurers now have a powerful and direct channel through which to reach consumers in these underinsured markets.

Asia is increasingly powered by digital-savvy millennials. A report by Accenture found that millennials account for more than 45% of the region’s population. They are projected to have more spending power than any previous generation – an estimated USD 6 trillion in disposable income by 2020 – and are more likely to be comfortable sharing personal information in exchange for perks such as convenience, financial incentives and personalised services.

As the generation that grew up with the Internet, today’s millennials will likely be early adopters of InsurTech and help pave the way for greater innovation moving forward.

Millennials are not the only ones demanding change. Following technological advancements in other aspects of financial services, customers have come to expect the same from insurance.

Insurers need to be at the forefront of change

Faced with these fundamental shifts, insurers need to embrace transformation in the industry and enhance our capabilities in areas such as data analytics and new technologies, as well as invest significantly in innovation, talent and becoming more agile.

In recent years, the industry has seen a surge of competition from new entrants. A joint report by CB Insights and Willis Towers Watson Securities stated that global investment in InsurTech jumped a significant 36 percent from USD1.7 billion in 2016 to USD2.3 billion in 2017. 

Insurers should recognise that these disruptors present an opportunity, not a threat. In short, we both bring something to the table.

Established insurers like Aviva offer strengths such as deep insurance expertise, extensive proprietary data, a significant customer base, as well as cost and scale advantages, all of which cannot be easily replicated. Start-ups bring novel and creative solutions, and a level of agility that is just as hard for incumbents to develop.

Generally, incumbent insurers have been responding to the disruptors in three ways.

  1. Establishing innovation labs to enable more organic innovation, often by providing start-ups with ‘space’, mentorship and small amounts of seed funding. For instance, Aviva has launched Digital Garages in the UK, Singapore and Canada which are dedicated spaces for the best minds from Aviva and the wider industry to come together to explore, collaborate and test new insurance ideas.
  2. Partnering with complementary disruptors.
  3. Launching corporate venture funds, which enable insurers to take stakes in a number of start-ups that could eventually become commercial partners and potentially disrupt the industry.
    One such example is Aviva Ventures is, a venture capital fund that seeks to invest in early-stage technology businesses at the forefront of innovation.

Rethinking the future of insurance

Disruption is no longer just a theoretical concept – it is real and happening around us now, whether that is transforming insurance advice, underwriting, or claims processes. However, room remains for more.

Innovation has so far concentrated on certain parts of the value chain: customer experience, to simplify the user journey; enhancing lead-generation and distribution through digital tools to make processes seamless and more efficient; and data analytics, to transform the wealth of data that insurers have into actionable insights with which to enrich customer propositions.

Moving forward, we need to prime ourselves for “InsurTech 2.0” – the next phase of transformation as we disrupt ourselves, rethink insurance, and reimagine traditional models. The next era of analytics will go beyond pricing or improving products.  It will create truly intelligent customer propositions that solve problems even before one realises the need.

Imagine a future where cancer could be detected from your breath, or if medical staff could be alerted even before an illness progresses – these may sound far-fetched, but are just two of the technologies Aviva Ventures has invested in.

In the millennia since the Babylonians, insurance has continued to keep societies protected from life’s greatest uncertainties. 

As insurers, we play a critical role in societies’ welfare, working alongside governments to enable better health and retirement.

Disruption will help us take even bigger strides forward. Instead of trying to fight it, the successful insurer of tomorrow will embrace the inevitable. They will source innovation, create an environment that nurtures it and taps into it.

Ultimately, innovation needs to be open and inclusive to take flight.




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